The Securities and Exchange Commission (SEC) is investigating Chesapeake Energy Corporation (NYSE:CHK) and its chief executive officer, Aubrey McClendon in connection with the controversial perk allowing the CEO to purchase a certain percentage of the wells operated by the oil and natural gas company, according to a report from Fox Business.
Chesapeake revealed about the on-going investigation on its latest filing with the SEC. The inquiry came nine days after the company issued the findings of its own internal inquiry that McClendon did not commit intentional wrongdoing related to his finances and the well program.
The SEC is looking into the Founder Well Participation Program (FWPP), a perk provided to McClendon by Chesapeake, which allowed him to purchase 2.5 percent of all the wells drilled by the company. Last year, Reuters reported that McClendon incurred $1.1 billion unreported loans from the company for a period of three years, and the same funds were used by the CEO to purchase his 2.5 percent stake in each of the wells drilled by the company.
The controversy prompted McClendon to step down as chairman of the Chesapeake Energy Corporation (NYSE:CHK) in May. He also agreed to terminate the FWPP after the Mason Hawkins’ Southeastern Asset Management, the largest shareholder of the company fought against it.
In December, the SEC informed Chesapeake that its informal inquiry launched last May will continue as an investigation. The agency sent subpoenas to Chesapeake and McClendon to provide information and testimony. The company and CEO complied with the subpoena.
"I'm now confused because the board just said everything was fine. I really thought the board had an iron-clad, air-tight grip on the situation. Unfortunately the saga continues," said Oppenheimer oil analyst, Fadeil Gheit.
Chesapeake Energy Corporation (NYSE:CHK) also revealed in its regulatory filing that it is also responding to the inquiries of other agencies. The Department of Justice (DOJ) is investigating allegations that the company violated antitrust laws in connection with the purchase and lease of oil and gas rights in Michigan.
Northstar Energy Corporation, a major landowner in the state filed a lawsuit against Encana and Chesapeake Energy claiming that they conspired in rigging the bidding of oil and gas rights in Michigan in 2010.
Last January, McClendon said that he will resign as CEO of the company effective April 1. The stock price of the company skyrocketed on reports of his resignation. As of this writing, the shares of Chesapeake Energy Corporation (NYSE:CHK) fell at $19.99 per share.